New Study Shows NY Minimum Wage Proposal Ineffective at Targeting Working Poor

Employment Policies Institute Study Reveals Flaws in Proposed Wage Hike
  • Publication Date: January 2008

  • Topics: Minimum Wage

WASHINGTON – The Employment Policies Institute (EPI) released a new study today showing that the proposed New York State minimum wage hike is wildly ineffective at targeting those who need help the most. The study shows that nearly 50% of those who benefit from minimum wage hikes live in households earning at least three times the poverty level income and the majority of those affected are the 2nd or 3rd earner in their family.

The legislation currently being debated in the Assembly Labor Committee would gradually increase the New York state minimum wage level to $8.25 by 2011. Beginning in 2012 the wage would be put on autopilot and indexed to inflation.

The study, co-authored by Cornell University professor Richard Burkhauser and University of Georgia professor Joseph Sabia, analyzed New York state employment data to produce startling figures about the effects of the proposed wage hike.

• 47% of those who benefit from the minimum wage hike live in households earning at least three times above the poverty level income ($49,800 and above)
• Only 13.6% of the employees affected are single mothers;
• The majority (58.2%) of minimum wage workers in New York are not the highest earners in their family.

The study concludes that an increase in the New York State Earned Income Tax Credit (EITC) from 30% to 45% would be a much more effective anti-poverty tool. The EITC narrowly targets the working poor and research shows that its effects will include increasing employment and labor earnings while decreasing poverty.

“The proposed minimum wage increase would be an extremely inefficient way to combat poverty and help low-skilled, low-income working New Yorkers,” said Employment Policies Institute economist David Kreutzer. “Additionally putting minimum wage hikes on auto-pilot will only increase costs to consumers and exacerbate job loss especially during economic downturns.”

Kreutzer concluded: “The legislature could best help the working poor in New York by increasing the Earned Income Tax Credit and rejecting ill-advised mandated wage hikes.”